Abnormal Return
Definition
A rate of return for taking a particular risk that is greater than that required by the market. The excess return is usually measured as being relative to that which the capital asset pricing model or the arbitrage pricing theory requires.
Example
Example 1:
A Lagos investor buys Dangote Cement shares just before a major government infrastructure announcement, and his returns far exceed what the Nigerian Stock Exchange average would predict that extra profit is his abnormal return.
Example 2:
A trader in Chicago buys Tesla shares before an unexpectedly strong earnings report, earning returns well above what analysts and market models predicted the excess gain is classified as an abnormal return.